CUNO INCORPORATED
1996 STOCK INCENTIVE PLAN
DRAFT
JULY 17, 1996
CUNO INCORPORATION
1996 STOCK INCENTIVE PLAN
TABLE OF CONTENTS
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ARTICLE I
ESTABLISHMENT.............................................................................................................. 1
1.1 Purpose........................................................................................................ 1
ARTICLE II
DEFINITIONS................................................................................................................ 1
2.1 "Affiliate"..................................................................................................... 1
2.2 "Agreement" or "Award Agreement"................................................................................ 1
2.3 "Annual Incentive Award"........................................................................................ 1
2.4 "Award," "Performance Shares," or "Annual Incentive Awards"..................................................... 1
2.5 "Board of Directors" or "Board"................................................................................. 1
2.6 "Cause"......................................................................................................... 2
2.7 "Change in Control," "Change in Control Price," and "Potential Change in Control"............................... 2
2.8 "Code" or "Internal Revenue Code"............................................................................... 2
2.9 "Commission".................................................................................................... 2
2.10 "Committee"..................................................................................................... 2
2.11 "Common Stock".................................................................................................. 2
2.12 "Company"....................................................................................................... 2
2.13 "Deferred Stock"................................................................................................ 2
2.14 "Disability".................................................................................................... 2
2.15 "Disinterested Person".......................................................................................... 3
2.16 "Effective Date"................................................................................................ 3
2.17 "Exchange Act".................................................................................................. 3
2.18 "Extraordinary Termination of Employment"....................................................................... 3
2.19 "Fair Market Value"............................................................................................. 3
2.20 "Grant Date".................................................................................................... 3
2.21 "Incentive Stock Option"........................................................................................ 3
2.22 "Nonqualified Stock Option"..................................................................................... 3
2.23 "Option Period"................................................................................................. 3
2.24 "Option Price".................................................................................................. 3
2.25 "Participant"................................................................................................... 3
2.26 "Performance Shares"............................................................................................ 3
2.27 "Plan".......................................................................................................... 3
2.28 "Representative"................................................................................................ 3
2.29 "Restricted Stock".............................................................................................. 4
2.30 "Retirement".................................................................................................... 4
2.31 "Rule 16b-3" and "Rule 16a-1(c)(3)"............................................................................. 4
2.32 "Stock Appreciation Right"...................................................................................... 4
2.33 "Stock Option" or "Option"...................................................................................... 4
2.34 "Termination of Employment"..................................................................................... 4
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ARTICLE III
ADMINISTRATION ........................................................... 5
3.1 Committee Structure and Authority ............................. 5
ARTICLE IV
STOCK SUBJECT TO PLAN ..................................................... 7
4.1 Number of Shares ............................................... 7
4.2 Release of Shares .............................................. 7
4.3 Restrictions on Shares ......................................... 7
4.4 Stockholder Rights ............................................. 8
4.5 Best Efforts To Register ....................................... 8
4.6 Anti-Dilution .................................................. 8
ARTICLE V
ELIGIBILITY ............................................................... 9
5.1 Eligibility .................................................... 9
ARTICLE VI
STOCK OPTIONS ............................................................ 9
6.1 General ....................................................... 9
6.2 Grant and Exercise ............................................ 9
6.3 Terms and Conditions .......................................... 10
6.4 Termination by Reason of Death ................................ 12
6.5 Termination by Reason of Disability ........................... 12
6.6 Other Termination ............................................. 12
6.7 Cashing Out of Option ......................................... 12
ARTICLE VII
STOCK APPRECIATION RIGHTS ................................................ 13
7.1 General ....................................................... 13
7.2 Grant ......................................................... 13
7.3 Terms and Conditions .......................................... 13
ARTICLE VIII
RESTRICTED STOCK ......................................................... 15
8.1 General ....................................................... 15
8.2 Awards and Certificates ....................................... 15
8.3 Terms and Conditions .......................................... 15
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ARTICLE IX
DEFERRED STOCK ........................................................... 16
9.1 General ....................................................... 16
9.2 Terms and Conditions .......................................... 17
ARTICLE X
PERFORMANCE SHARES ....................................................... 18
10.1 General ....................................................... 18
10.2 Price ......................................................... 18
10.3 Performance Share Agreement ................................... 18
10.4 Performance Periods ........................................... 18
10.5 Performance Goals ............................................. 18
10.6 Earning of Performance Shares ................................. 19
ARTICLE XI
ANNUAL INCENTIVE AWARDS .................................................. 20
11.1 Eligibility ................................................... 20
11.2 Earning of Annual Incentive Awards ............................ 20
11.3 Payments and Election ......................................... 20
ARTICLE XII
PROVISIONS APPLICABLE TO STOCK ACQUIRED UNDER THIS PLAN .................. 21
12.1 Transfer of Shares ............................................ 21
12.2 Limited Transfer During Offering .............................. 21
12.3 Committee Discretion .......................................... 22
ARTICLE XIII
CHANGE IN CONTROL PROVISIONS ............................................. 22
13.1 Impact of Event ............................................... 22
13.2 Definition of Change in Control ............................... 23
13.3 Change in Control Price ....................................... 24
13.4 Potential Change in Control ................................... 24
ARTICLE XIV
MISCELLANEOUS ............................................................ 25
14.1 Amendments and Termination .................................... 25
14.2 Unfunded Status of Plan ....................................... 25
14.3 Status of Awards Under Code Section 162(m) .................... 25
14.4 General Provisions ............................................ 26
14.5 Mitigation of Excise Tax ...................................... 27
14.6 Rights with Respect to Continuance of Employment .............. 28
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14.7 Awards in Substitution for Awards Granted by Other Corporations.. 28
14.8 Procedure for Adoption .......................................... 28
14.9 Procedure for Withdrawal ........................................ 28
14.10 Delay ........................................................... 29
14.11 Headings ........................................................ 29
14.12 Severability .................................................... 29
14.13 Successors and Assigns .......................................... 29
14.14 Entire Agreement ................................................ 29
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CUNO INCORPORATED
1996 STOCK INCENTIVE PLAN
ARTICLE I
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ESTABLISHMENT
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1.1 Purpose.
The CUNO Incorporated 1996 Stock Incentive Plan ("Plan") is hereby
established by CUNO Incorporated ("Company"). The purpose of this Plan is to
promote the overall financial objectives of the Company and its stockholders by
motivating those persons selected to participate in this Plan to achieve long-
term growth in stockholder equity in the Company and by retaining the
association of those individuals who are instrumental in achieving this growth.
This Plan and the grant of awards hereunder is expressly conditioned upon the
Plan's approval by the security holders of the Company to the extent the
Committee deems necessary or advisable. If such approval is not obtained, then
this Plan and all Awards hereunder shall be null and void ab initio. This Plan
is adopted effective as of July ____, 1996.
ARTICLE II
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DEFINITIONS
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For purposes of this Plan, the following terms are defined as set forth
below:
2.1 "Affiliate" means any individual, corporation, partnership,
association, limited liability company, joint-stock company, trust,
unincorporated association or other entity (other than the Company) that
directly, or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, the Company including, without
limitation, any member of an affiliated group of which the Company is a common
parent corporation as provided in Section 1504 of the Code.
2.2 "Agreement" or "Award Agreement" means any agreement entered into
pursuant to this Plan pursuant to which an Award is granted to a Participant.
2.3 "Annual Incentive Award" means an award granted pursuant to Article
XI.
2.4 "Award" means any Stock Option, Stock Appreciation Right, Restricted
Stock, Deferred Stock, Performance Share or Annual Incentive Award granted to a
Participant under the Plan.
2.5 "Beneficiary" means the person, persons, trust or trusts which have
been designated by a Participant in his or her most recent written beneficiary
designation filed with the Committee to receive the benefit specified under the
Plan to the extent permitted. If there is no designated
beneficiary, then the term means the person or persons, trust or trusts entitled
by will or the laws of descent and distribution to receive such benefits.
2.6 "Board of Directors" or "Board" means the Board of Directors of the
Company.
2.7 "Cause" shall mean, for purposes of whether and when a Participant
has incurred a Termination of Employment for Cause, any act or omission which
permits the Company to terminate the written agreement or arrangement between
the Participant and the Company or an Affiliate for Cause as defined in such
agreement or arrangement, or in the event there is no such agreement or
arrangement or the agreement or arrangement does not define the term "cause,"
then Cause shall mean (a) any act or failure to act deemed to constitute cause
under the Company's established practices, policies or guidelines applicable to
the Participant or (b) the Participant's act or omission constituting gross
misconduct with respect to the Company or an Affiliate in any material respect.
2.8 "Change in Control," "Change in Control Price," and "Potential Change
in Control" have the meanings set forth in Sections 13.2, 13.3 and 13.4,
respectively.
2.9 "Code" or "Internal Revenue Code" means the Internal Revenue Code of
1986, as amended, final Treasury Regulations thereunder and any subsequent
Internal Revenue Code.
2.10 "Commission" means the Securities and Exchange Commission or any
successor agency.
2.11 "Committee" means the person or persons appointed by the Board of
Directors to administer this Plan, as further described herein; provided,
however, the Committee shall consist of directors who are "disinterested"
persons within the meaning of Rule 16b-3 and each of whom is an "outside"
director under Section 162(m) of the Code.
2.12 "Common Stock" means the shares of the regular voting Common Stock,
$[ ] par value, whether presently or hereafter issued, and any other stock or
security resulting from adjustment thereof as described hereinafter or the
common stock of any successor to the Company which is designated for the purpose
of this Plan.
2.13 "Company" means CUNO Incorporated, a Delaware corporation, and
includes any successor or assignee corporation or corporations into which the
Company may be merged, changed or consolidated; any corporation for whose
securities all or substantially all of the securities of the Company shall be
exchanged; and any assignee of or successor to substantially all of the assets
of the Company.
2.14 "Covered Employee" means a Participant who is a "covered employee"
within the meaning of Section 162(m) of the Code.
2.15 "Deferred Stock" means an award made pursuant to Article IX to
receive Common Stock at the end of a specified period.
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2.16 "Disability" means a mental or physical illness that entitles the
Participant to receive benefits under the long term disability plan of the
Company or an Affiliate, or if the Participant is not covered by such a plan or
the Participant is not an employee of the Company or an Affiliate, a mental or
physical illness that renders a Participant totally and permanently incapable of
performing the Participant's duties for the Company or an Affiliate.
Notwithstanding the foregoing, a Disability shall not qualify under this Plan if
it is the result of (i) a willfully self-inflicted injury or willfully self-
induced sickness; or (ii) an injury or disease contracted, suffered, or
incurred, while participating in a criminal offense. The determination of
Disability shall be made by the Committee. The determination of Disability for
purposes of this Plan shall not be construed to be an admission of disability
for any other purpose.
2.17 "Effective Date" means July ____, 1996,.
2.18 "Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
2.19 "Extraordinary Termination of Employment" means the Termination of
Employment of the Participant due to death, Disability or Retirement.
2.20 "Fair Market Value" means the fair market value of Common Stock,
Awards, or other property as determined by the Committee or under procedures
established by the Committee. Unless otherwise determined by the Committee, the
Fair Market Value per share by Common Stock as of any date shall be the closing
sale price per share reported on a consolidated basis for stock listed on the
principal stock exchange or market on which the Common Stock is traded on the
date as of which such value is being determined or, if there is no sale ont that
date, then on the last previous day on which a sale was reported.
2.21 "Grant Date" means the date that as of which an Award is granted
pursuant to this Plan.
2.22 "Incentive Stock Option" means any Stock Option intended to be and
designated as an "incentive stock option" within the meaning of Section 422 of
the Code.
2.23 "Nonqualified Stock Option" means an Option to purchase Common Stock
in the Company granted under this Plan the taxation of which is pursuant to
Section 83 of the Code.
2.24 "Option Period" means the period during which the Option shall be
exercisable in accordance with the Agreement and Article VI.
2.25 "Option Price" means the price at which the Common Stock may be
purchased under an Option as provided in Section 6.3.
2.26 "Participant" means a person who satisfies the eligibility conditions
of Article V and to whom an Award has been granted by the Committee under this
Plan, and in the event a Representative is appointed for a Participant or
another person becomes a Representative, then the term "Participant" shall mean
such Representative. The term shall also include a trust for the benefit of the
Participant, a partnership the interest of which is by or for the benefit of the
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Participant, the Participant's parents, spouse or descendants, or a custodian
under a uniform gifts to minors act or similar statute for the benefit of the
Participant's descendants, to the extent permitted by the Committee and not
inconsistent with the Rule 16b-3 or the status of the Option as an Incentive
Stock Option to the extent intended. Notwithstanding the foregoing, the term
"Termination of Employment" shall mean the Termination of Employment of the
employee.
2.27 "Performance Shares" means a right, granted under Article X, to
receive Awards based upon criteria specified by the Committee.
2.28 "Plan" means this CUNO Incorporated 1996 Stock Incentive Plan, as the
same may be amended from time to time.
2.29 "Representative" means (a) the person or entity acting as the executor
or administrator of a Participant's estate pursuant to the last will and
testament of a Participant or pursuant to the laws of the jurisdiction in which
the Participant had the Participant's primary residence at the date of the
Participant's death; (b) the person or entity acting as the guardian or
temporary guardian of a Participant; (c) the person or entity which is the
Beneficiary of the Participant upon or following the Participant's death; or (d)
any person to whom an Option has been transferred with the permission of the
Committee or by operation of law; provided that only one of the foregoing shall
be the Representative at any point in time as determined under applicable law
and recognized by the Committee.
2.30 "Restricted Stock" means an award of Common Stock under Article VIII
that is subject to certain restrictions and a risk of forfeiture.
2.31 "Retirement" means the Participant's Termination of Employment after
attaining either the normal retirement age or the early retirement age as
defined in the principal (as determined by the Committee) tax-qualified plan of
the Company or an Affiliate, if the Participant is covered by such plan, and if
the Participant is not covered by such a plan, then age 65, or age 55 with the
accrual of 10 years of service.
2.32 "Rule 16b-3 and "Rule 16a-1(c)(3)" means Rule 16b-3 and Rule 16a-
1(c)(3), as from time to time in effect and applicable to the Plan and
Participants, promulgated by the Securities and Exchange Commission under
Section 16 of the Exchange Act.
2.33 "Stock Appreciation Right" means a right granted under Article VII.
2.34 "Stock Option" or "Option" means a right to purchase stock on
specified conditions granted under Article VI.
2.35 "Termination of Employment" means the occurrence of any act or event
whether pursuant to an employment agreement or otherwise that actually or
effectively causes or results in the person's ceasing, for whatever reason, to
be an officer, independent contractor, director or employee of the Company or of
any Affiliate, or to be an officer, independent contractor, director or employee
of any entity that provides services to the Company or an Affiliate, including,
without limitation, death, Disability, dismissal, severance at the election of
the Participant, Retirement, or severance as a result of the discontinuance,
liquidation, sale or transfer
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by the Company or its Affiliates of all businesses owned or operated by the
Company or its Affiliates. With respect to any person who is not an employee
with respect to the Company or an Affiliate, the Agreement shall establish what
act or event shall constitute a Termination of Employment for purposes of this
Plan. A transfer of employment from the Company to an Affiliate, or from an
Affiliate to the Company, shall not be a Termination of Employment, unless
expressly determined by the Committee. A Termination of Employment shall occur
to an employee who is employed by an Affiliate if the Affiliate shall cease to
be an Affiliate and the Participant shall not immediately thereafter become an
employee of the Company or an Affiliate.
In addition, certain other terms used herein have definitions given to them
in the first place in which they are used.
ARTICLE III
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ADMINISTRATION
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3.1 Committee Structure and Authority. This Plan shall be administered by
the Committee which shall be comprised of one or more persons. The Committee
shall be the Compensation Committee of the Board of Directors, unless such
committee does not exist or the Board establishes a committee whose purpose is
the administration of this Plan. In the absence of an appointment, the Board or
the portion that qualifies as the Committee shall be the Committee. A majority
of the Committee shall constitute a quorum at any meeting thereof (including
telephone conference) and the acts of a majority of the members present, or acts
approved in writing by a majority of the entire Committee without a meeting,
shall be the acts of the Committee for purposes of this Plan. The Committee may
authorize any one or more of its members or an officer of the Company to execute
and deliver documents on behalf of the Committee. A member of the Committee
shall not exercise any discretion respecting himself or herself under this Plan.
The Board shall have the authority to remove, replace or fill any vacancy of any
member of the Committee upon notice to the Committee and the affected member.
Any member of the Committee may resign upon notice to the Board. The Committee
may allocate among one or more of its members, or may delegate to one or more of
its agents, such duties and responsibilities as it determines.
Among other things, the Committee shall have the authority, subject to the
terms of this Plan:
(a) to select those persons to whom Awards may be granted from time to
time;
(b) to determine whether and to what extent Awards are to be granted
hereunder;
(c) to determine the number of shares of Common Stock to be covered by
each Award granted hereunder;
(d) to determine the terms and conditions of any Award granted
hereunder (including, but not limited to, the Option Price, the Option
Period, any exercise restriction
5
or limitation; any exercise acceleration or forfeiture waiver or any
performance criteria regarding any Award and the shares of Common Stock
relating thereto);
(e) to adjust the terms and conditions, at any time or from time to time,
of any Award, subject to the limitations of Section 14.1;
(f) to determine to what extent and under what circumstances Common Stock
and other amounts payable with respect to an Award shall be deferred;
(g) to determine under what circumstances an Award may be settled in cash
or Common Stock.
(h) to provide for the forms of Agreement to be utilized in connection with
this Plan;
(i) to determine whether a Participant has a Disability or a Retirement;
(j) to determine what securities law requirements are applicable to this
Plan, Awards, and the issuance of shares of Common Stock and to require of a
Participant that appropriate action be taken with respect to such requirements;
(k) to cancel, with the consent of the Participant or as otherwise provided
in this Plan or an Agreement, outstanding Awards;
(l) to interpret and make a final determination with respect to the
remaining number of shares of Common Stock available under this Plan;
(m) to require as a condition of the exercise of an Award or the issuance
or transfer of a certificate of Common Stock, the withholding from a Participant
of the amount of any federal, state or local taxes as may be necessary in order
for the Company or any other employer to obtain a deduction or as may be
otherwise required by law;
(n) to determine whether and with what effect an individual has incurred a
Termination of Employment;
(o) to determine whether the Company or any other person has a right or
obligation to purchase Common Stock from a Participant and, if so, the terms and
conditions on which such Common Stock is to be purchased;
(p) to determine the restrictions or limitations on the transfer of Common
Stock;
(q) to determine whether an Award is to be adjusted, modified or purchased,
or is to become fully exercisable, under this Plan or the terms of an Agreement;
(r) to determine the permissible methods of Award exercise and payment,
including cashless exercise arrangements;
6
(s) to adopt, amend and rescind such rules and regulations as, in its
opinion, may be advisable in the administration of this Plan; and
(t) to appoint and compensate agents, counsel, auditors or other
specialists to aid it in the discharge of its duties.
The Committee shall have the authority to adopt, alter and repeal such
administrative rules, guidelines and practices governing this Plan as it shall,
from time to time, deem advisable, to interpret the terms and provisions of this
Plan and any Award issued under this Plan (and any Agreement) and to otherwise
supervise the administration of this Plan. The Committee's policies and
procedures may differ with respect to Awards granted at different times or to
different Participants.
Any determination made by the Committee pursuant to the provisions of this
Plan shall be made in its sole discretion, and in the case of any determination
relating to an Award, may be made at the time of the grant of the Award or,
unless in contravention of any express term of this Plan or an Agreement, at any
time thereafter. All decisions made by the Committee pursuant to the provisions
of this Plan shall be final and binding on all persons, including the Company
and Participants. Any determination shall not be subject to de novo review if
challenged in court.
ARTICLE IV
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STOCK SUBJECT TO PLAN
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4.1 Number of Shares. Subject to the adjustment under Section 4.6, the
total number of shares of Common Stock reserved and available for distribution
pursuant to Awards under this Plan shall be 1,000,000 shares of Common Stock
authorized for issuance on the Effective Date plus any unused shares under, or
shares allocated by the Committee from, the Company's Non-Employee Directors'
Stock Option Plan. Such shares may consist, in whole or in part, of authorized
and unissued shares or treasury shares.
4.2 Release of Shares. The Committee shall have full authority to
determine the number of shares of Common Stock available for Award, and in its
discretion may include (without limitation) as available for distribution any
shares of Common Stock that have ceased to be subject to an Award, any shares of
Common Stock subject to any Award that are forfeited, any Award that otherwise
terminates without issuance of shares of Common Stock being made to the
Participant, or any shares (whether or not restricted) of Common Stock that are
received by the Company in connection with the exercise of an Award including
the satisfaction of any tax liability or the satisfaction of a tax withholding
obligation. If any shares could not again be available for Awards to a
particular Participant under any applicable law, such shares shall be available
exclusively for Awards to Participants who are not subject to such limitations.
4.3 Restrictions on Shares. Shares of Common Stock issued upon exercise
of an Award shall be subject to the terms and conditions specified herein and to
such other terms, conditions and restrictions as the Committee in its discretion
may determine or provide in the Award Agreement. The Company shall not be
required to issue or deliver any certificates for shares of Common Stock, cash
or other property prior to (i) the listing of such shares on any stock exchange
(or other public market) on which the Common Stock may then be listed (or
regularly
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traded), (ii) the completion of any registration or qualification of such shares
under federal or state law, or any ruling or regulation of any government body
which the Committee determines to be necessary or advisable, and (iii) the
satisfaction of any applicable withholding obligation in order for the Company
or an Affiliate to obtain a deduction with respect to the exercise of an Award.
The Company may cause any certificate for any share of Common Stock to be
delivered to be properly marked with a legend or other notation reflecting the
limitations on transfer of such Common Stock as provided in this Plan or as the
Committee may otherwise require. The Committee may require any person
exercising an Award to make such representations and furnish such information as
it may consider appropriate in connection with the issuance or delivery of the
shares of Common Stock in compliance with applicable law or otherwise.
Fractional shares shall not be delivered, but shall be rounded to the next lower
whole number of shares.
4.4 Stockholder Rights. No person shall have any rights of a stockholder
as to shares of Common Stock subject to an Award until, after proper exercise of
the Award or other action required, such shares shall have been recorded on the
Company's official stockholder records as having been issued and transferred.
Upon exercise of the Award or any portion thereof, the Company will have thirty
(30) days in which to issue the shares, and the Participant will not be treated
as a stockholder for any purpose whatsoever prior to such issuance. No
adjustment shall be made for cash dividends or other rights for which the record
date is prior to the date such shares are recorded as issued and transferred in
the Company's official stockholder records, except as provided herein or in an
Agreement.
4.5 Best Efforts To Register. If there has been a Public Offering, the
Company will register under the Securities Act the Common Stock delivered or
deliverable pursuant to Awards on Commission Form S-8 if available to the
Company for this purpose (or any successor or alternate form that is
substantially similar to that form to the extent available to effect such
registration), in accordance with the rules and regulations governing such
forms, as soon as such forms are available for registration to the Company for
this purpose. The Company will use its best efforts to cause the registration
statement to become effective as soon as possible and will file such supplements
and amendments to the registration statement as may be necessary to keep the
registration statement in effect until the earliest of (a) one year following
the expiration of the last relevant period of the last Award outstanding, (b)
the date the Company is no longer a reporting company under the Exchange Act and
(c) the date all Participants have disposed of all shares of Common Stock
delivered pursuant to any Award. The Company may delay the foregoing obligation
if the Committee reasonably determines that any such registration would
materially and adversely affect the Company's interests or if there is no
material benefit to Participants.
4.6 Anti-Dilution. In the event of any Company stock dividend, stock
split, combination or exchange of shares, recapitalization or other change in
the capital structure of the Company, corporate separation or division of the
Company (including, but not limited to, a split-up, spin-off, split-off or
distribution to Company stockholders other than a normal cash dividend), sale by
the Company of all or a substantial portion of its assets (measured on either a
stand-alone or consolidated basis), reorganization, rights offering, a partial
or complete liquidation, or any other corporate transaction, Company share
offering or event involving the Company and having an effect similar to any of
the foregoing, then the Committee may adjust or substitute, as the case may be,
the number of shares of Common Stock available for Awards under this Plan, the
number of shares of Common Stock covered by outstanding Awards, the exercise
price per share of
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outstanding Awards, and any other characteristics or terms of the Awards as the
Committee shall deem necessary or appropriate to reflect equitably the effects
of such changes to the Participants; provided, however, that the Committee may
limit any such adjustment so as to maintain the deductibility of the Awards
under Section 162(m) of the Code, and that any fractional shares resulting from
such adjustment shall be eliminated by rounding to the next lower whole number
of shares with appropriate payment for such fractional share as shall reasonably
be determined by the Committee.
ARTICLE V
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ELIGIBILITY
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5.1 Eligibility. Except as herein provided, the persons who shall be
eligible to participate in this Plan and be granted Awards shall be those
persons who are officers, employees and consultants of the Company or any
subsidiary, who shall be in a position, in the opinion of the Committee, to make
contributions to the growth, management, protection and success of the Company
and its subsidiaries. Of those persons described in the preceding sentence, the
Committee may, from time to time, select persons to be granted Awards and shall
determine the terms and conditions with respect thereto. In making any such
selection and in determining the form of the Award, the Committee may give
consideration to the functions and responsibilities of the person's
contributions to the Company and its subsidiaries, the value of the individual's
service to the Company and its subsidiaries and such other factors deemed
relevant by the Committee. The Committee may designate any person who is not
eligible to participate in this Plan if such person would otherwise be eligible
to participate in this Plan (and members of the Committee are expressly excluded
from participation to the extent necessary for purposes of Rule 16h-3, Section
162(m) of the Code or any other legal reason).
ARTICLE VI
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STOCK OPTIONS
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6.1 General. The Committee shall have authority to grant Options under this
Plan at any time or from time to time. Stock Options may be granted alone or in
addition to other Awards and may be either Incentive Stock Options or
Non-Qualified Stock Options. An Option shall entitle the Participant to receive
shares of Common Stock upon exercise of such Option, subject to the
Participant's satisfaction in full of any conditions, restrictions or
limitations imposed in accordance with this Plan or an Agreement (the terms and
provisions of which may differ from other Agreements) including without
limitation, payment of the Option Price. During any three-calendar-year period,
Options for no more than one-half of all shares of Common Stock available for
grant under the Plan shall be granted to any Participant.
6.2 Grant and Exercise. The grant of a Stock Option shall occur as of
the date the Committee determines. Each Option granted under this Plan shall be
evidenced by an Agreement, in a form approved by the Committee, which shall
embody the terms and conditions of such Option and which shall be subject to the
express terms and conditions set forth in this Plan. Such Agreement shall
become effective upon execution by the Participant. Only a person who is a
common-law employee of the Company, any parent corporation of the Company or a
subsidiary
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(as such terms are defined in Section 424 of the Code) on the Grant date shall
be eligible to be granted an Option which is intended to be and is an Incentive
Stock Option. To the extent that any Stock Option is not designated as an
Incentive Stock Option or even if so designated does not qualify as an Incentive
Stock Option, it shall constitute a Non-Qualified Stock Option.
6.3 Terms and Conditions. Stock Options shall be subject to such terms
and conditions as shall be determined by the Committee, including the following:
(a) Option Period. The Option Period of each Stock Option shall be
fixed by the Committee; provided that no Non-Qualified Stock Option shall
be exercisable more than fifteen (15) years after the date the Stock Option
is granted. In the case of an Incentive Stock Option, the Option Period
shall not exceed ten (10) years from the date of grant or five (5) years in
the case of an individual who owns more than ten percent (10%) of the
combined voting power of all classes of stock of the Company, a corporation
which is a parent corporation of the Company or any subsidiary of the
Company (each as defined in Section 424 of the Code). No Option which is
intended to be an Incentive Stock Option shall be granted more than ten
(10) years from the date this Plan is adopted by the Company or the date
this Plan is approved by the stockholders of the Company, whichever is
earlier.
(b) Option Price. The Option Price per share of the Common Stock
purchasable under an Option shall be determined by the Committee. If such
Option is intended to qualify as an Incentive Stock Option, the Option
Price per share shall be not less than the Fair Market Value per share on
the date the Option is granted, or where granted to an individual who owns
or who is deemed to own stock possessing more than ten percent (10%) of the
combined voting power of all classes of stock of the Company, a corporation
which is a parent corporation of the Company or any subsidiary of the
Company (each as defined in Section 424 of the Code), not less than one
hundred ten percent (110%) of such Fair Market Value per share.
(c) Exercisability. Subject to Section 13.1, Stock Options shall be
exercisable at such time or times and subject to such terms and conditions
as shall be determined by the Committee. If the Committee provides that
any Stock Option is exercisable only in installments, the Committee may at
any time waive such installment exercise provisions, in whole or in part.
In addition, the Committee may at any time accelerate the exercisability of
any Stock Option. If the Committee intends that an Option be an Incentive
Stock Option, the Committee shall, in its discretion, provide that the
aggregate Fair Market Value (determined at the Grant Date) of Incentive
Stock Option which is exercisable for the first time during the calendar
year shall not exceed $100,000.
(d) Method of Exercise. Subject to the provisions of this Article VI,
a Participant may exercise Stock Options, in whole or in part, at any time
during the Option Period by the Participant's giving written notice of
exercise on a form provided by the Committee (if available) to the Company
specifying the number of shares of Common Stock subject to the Stock Option
to be purchased. Such notice shall be accompanied by payment in full of
the purchase price by cash or check or such other form of payment as the
Company may accept. If approved by the Committee (including approval at
the time
10
of exercise), payment in full or in part may also be made (i) by delivering
Common Stock already owned by the Participant having a total Fair Market Value
on the date of such delivery equal to the Option Price; (ii) by the execution
and delivery of a note or other evidence of indebtedness (and any security
agreement thereunder) satisfactory to the Committee and permitted in accordance
with Section 6.3(e); (iii) by authorizing the Company to retain shares of Common
Stock which would otherwise be issuable upon exercise of the Option having a
total Fair Market Value on the date of delivery equal to the Option Price; (iv)
by the delivery of cash or the extension of credit by a broker-dealer to whom
the Participant has submitted a notice of exercise or otherwise indicated an
intent to exercise an Option (in accordance with Part 220, Chapter II, Title 12
of the Code of Federal Regulations, so-called "cashless" exercise); (v) by
certifying ownership of shares of Common Stock owned by the Participant to the
satisfaction of the Committee for later delivery to the Company as specified by
the Company; or (vi) by any combination of the foregoing. If payment of the
Option Price of a Non-Qualified Stock Option is made in whole or in part in the
form of Restricted Stock or Deferred Stock, the number of shares of Common Stock
to be received upon such exercise equal to the number of shares of Restricted
Stock or Deferred Stock used for payment of the Option Price shall be subject to
the same forfeiture restrictions or deferral limitations to which such
Restricted Stock or Deferred Stock was subject, unless otherwise determined by
the Committee. In the case of an Incentive Stock Option, the right to make a
payment in the form of already owned shares of Common Stock of the same class as
the Common Stock subject to the Stock Option may be authorized only at the time
the Stock Option is granted. No shares of Common Stock shall be issued until
full payment therefor, as determined by the Committee, has been made. Subject to
any forfeiture restrictions or deferral limitations that may apply if a Stock
Option is exercised using Restricted Stock or Deferred Stock, a Participant
shall have all of the rights of a stockholder of the Company holding the class
of Common Stock that is subject to such Stock Option (including, if applicable,
the right to vote the shares and the right to receive dividends), when the
Participant has given written notice of exercise, has paid in full for such
shares and such shares have been recorded on the Company's official stockholder
records as having been issued and transferred.
(e) Company Loan or Guarantee. Upon the exercise of any Option and subject
to the pertinent Agreement and the discretion of the Committee, the Company may
at the request of the Participant:
(i) lend to the Participant, with recourse, an amount equal to such portion
of the Option Price as the Committee may determine; or
(ii) guarantee a loan obtained by the Participant from a third-party for
the purpose of tendering the Option Price.
The terms and conditions of any loan or guarantee, including the term, interest
rate, and any security interest thereunder, shall be determined by the
Committee, except that no extension of credit or guarantee shall obligate the
Company for an amount to exceed the lesser of the aggregate Fair Market Value
per share of the Common Stock on the date of exercise, less the par value of the
shares of Common Stock to be purchased upon the
11
exercise of the Award, or the amount permitted under applicable laws or the
regulations and rules of the Federal Reserve Board and any other governmental
agency having jurisdiction.
(f) Non-transferability of Options. Except as provided herein or in an
Agreement and then only consistent with the intent that the Option be an
Incentive Stock Option, no Stock Option or interest therein shall be
transferable by the Participant other than by will or by the laws of
descent and distribution or by a designation of beneficiary effective upon
the death of the Participant, and all Stock Options shall be exercisable
during the Participant's lifetime only by the Participant. If and to the
extent transferability is permitted by Rule 16b-3 and except as otherwise
provided herein or by an Agreement, every Option granted hereunder shall be
freely transferable, but only if such transfer does not result in liability
under Section 16 of the Exchange Act to the Participant or other
Participants and is consistent with registration of the Option and sale of
Common Stock on Form S-8 (or a successor form) or the Committee's waiver of
such condition.
6.4 Termination by Reason of Death. Unless otherwise provided in an
Agreement or determined by the Committee, if a Participant incurs a Termination
of Employment due to death, any unexpired and unexercised Stock Option held by
such Participant shall thereafter be fully exercisable for a period of one (1)
year (or such other period or no period as the Committee may specify)
immediately following the date of such death or until the expiration of the
Option Period, whichever period is the shorter.
6.5 Termination by Reason of Disability. Unless otherwise provided in an
Agreement or determined by the Committee, if a Participant incurs a Termination
of Employment due to a Disability, any unexpired and unexercised Stock Option
held by such Participant shall thereafter be fully exercisable by the
Participant for the period of one (1) year (or such other period or no period as
the Committee may specify) immediately following the date of such Termination of
Employment or until the expiration of the Option Period, whichever period is
shorter, and the Participant's death at any time following such Termination of
Employment due to Disability shall not affect the foregoing. In the event of
Termination of Employment by reason of Disability, if an Incentive Stock Option
is exercised after the expiration of the exercise periods that apply for
purposes of Section 422 of the Code, such Stock Option will thereafter be
treated as a Non-Qualified Stock Option.
6.6 Other Termination. Unless otherwise provided in an Agreement or
determined by the Committee, if a Participant incurs a Termination of Employment
due to Retirement, or the Termination of Employment is involuntary on the part
of the Participant (but is not due to death, Disability or with Cause), any
Stock Option held by such Participant shall thereupon terminate, except that
such Stock Option, to the extent then exercisable, may be exercised for the
lesser of the three-month period commencing with the date of such Termination of
Employment or until the expiration of the Option Period. Unless otherwise
provided in an Agreement or determined by the Committee, if the Participant
incurs a Termination of Employment which is either (a) voluntary on the part of
the Participant (and is not due to Retirement) or (b) with Cause, the Option
shall terminate immediately. Unless otherwise provided in an Agreement or
determined by the Committee, the death or Disability of a Participant after a
Termination of Employment
12
otherwise provided herein shall not extend the exercisability of the time
permitted to exercise an Option.
6.7 Cashing Out of Option. On receipt of written notice of exercise, the
Committee may elect to cash out all or part of the portion of any Stock Option
by paying the Participant an amount, in cash or Common Stock, equal to the
excess of the Fair Market Value of the Common Stock that is subject to the
Option over the Option Price times the number of shares of Common Stock subject
to the Option on the effective date of such cash out.
ARTICLE VII
-----------
STOCK APPRECIATION RIGHTS
-------------------------
7.1 General. The Committee shall have authority to grant Stock
Appreciation Rights under this Plan at any time or from time to time. Subject
to the Participant's satisfaction in full of any conditions, restrictions or
limitations imposed in accordance with this Plan or an Agreement, a Stock
Appreciation Right shall entitle the Participant to surrender to the Company the
Stock Appreciation Right and to be paid therefor in shares of the Common Stock,
cash or a combination thereof as herein provided, the amount described in
Section 7.3(b).
7.2 Grant. Stock Appreciation Rights may be granted in conjunction with
all or part of any Stock Option granted under this Plan in which case the
exercise of the Stock Appreciation Right shall require the cancellation of a
corresponding portion of the Stock Option, and the exercise of the Stock Option
will result in cancellation of a corresponding portion of the Stock Appreciation
Right. In the case of a Non-Qualified Stock Option, such rights may be granted
either at or after the time of grant of such Stock Option. In the case of an
Incentive Stock Option, such rights may be granted only at the time of grant of
such Stock Option. A Stock Appreciation Right may also be granted on a stand
alone basis. The grant of a Stock Appreciation Right shall occur as of the date
the Committee determines. Each Stock Appreciation Right granted under this Plan
shall be evidenced by an Agreement, which shall embody the terms and conditions
of such Stock Appreciation Right and which shall be subject to the terms and
conditions set forth in this Plan. During any three-calendar-year period, no
more than Stock Appreciation Rights shall be granted to any
Participant.
7.3 Terms and Conditions. Stock Appreciation Rights shall be subject to
such terms and conditions as shall be determined by the Committee, including the
following:
(a) Period and Exercise. The term of a Stock Appreciation Right shall
be established by the Committee. If granted in conjunction with a Stock
Option, the Stock Appreciation Right shall have a term which is the same as
the Option Period and shall be exercisable only at such time or times and
to the extent the related Stock Options would be exercisable in accordance
with the provisions of Article VI. A Stock Appreciation Right which is
granted on a stand alone basis shall be for such period and shall be
exercisable at such times and to the extent provided in an Agreement.
Stock Appreciation Rights shall be exercised by the Participant's giving
written notice of exercise on a form provided by the Committee (if
available) to the Company specifying the portion of the Stock Appreciation
Right to be exercised.
13
(b) Amount. Upon the exercise of a Stock Appreciation Right, a
Participant shall be entitled to receive an amount in cash, shares of
Common Stock or both as determined by the Committee or as otherwise
permitted in an Agreement equal in value to the excess of the Fair Market
Value per share of Common Stock over the Option Price per share of Common
Stock specified in the related Agreement multiplied by the number of shares
in respect of which the Stock Appreciation Right is exercised. In the case
of a Stock Appreciation Right granted on a stand alone basis, the Agreement
shall specify the value to be used in lieu of the Option Price per share of
Common Stock. The aggregate Fair Market Value per share of the Common
Stock shall be determined as of the date of exercise of such Stock
Appreciation Right.
(c) Special Rules. In the case of Stock Appreciation Rights relating
to Stock Options held by Participants who are actually or potentially
subject to Section 16(b) of the Exchange Act to the extent required by Rule
16b-3:
(i) The Committee may require that such Stock Appreciation
Rights be exercised only in accordance with the applicable
"window period" provisions of Rule 16b-3;
(ii) The Committee may provide that the amount to be paid upon
exercise of such Stock Appreciation Rights (other than those
relating to Incentive Stock Options) during a Rule 16b-3
"window period" shall be based on the highest mean sales
price of the Common Stock on the principal exchange on which
the Common Stock is traded, NASDAQ or other relevant market
for determining value on any day during such "window
period"; and
(iii) no Stock Appreciation Right shall be exercisable during
the first six months of its term, except that this
limitation shall not apply in the event of death or
Disability of the Participant prior to the expiration of the
six-month period.
(d) Non-transferability of Stock Appreciation Rights. Stock
Appreciation Rights shall be transferable only when and to the extent that
a Stock Option would be transferable under this Plan unless otherwise
provided in an Agreement.
(e) Termination. A Stock Appreciation Right shall terminate at such
time as a Stock Option would terminate under this Plan, unless otherwise
provided in an Agreement.
(f) Effect on Shares Under this Plan. To the extent required by Rule
16b-3, upon the exercise of a Stock Appreciation Right, the Stock Option or
part thereof to which such Stock Appreciation Right is related shall be
deemed to have been exercised for the purpose of the limitation set forth
in Section 4.2 on the number of shares of Common Stock to be issued under
this Plan, but only to the extent of the number of shares of Common Stock
covered by the Stock Appreciation Right at the time of exercise based on
the value of the Stock Appreciation Right at such time.
14
(g) Incentive Stock Option. A Stock Appreciation Right granted in
tandem with an Incentive Stock Option shall not be exercisable unless the
Fair Market Value of the Common Stock on the date of exercise exceeds the
Option Price. In no event shall any amount paid pursuant to the Stock
Appreciation Right exceed the difference between the Fair Market Value on
the date of exercise and the Option Price.
ARTICLE VIII
------------
RESTRICTED STOCK
----------------
8.1 General. The Committee shall have authority to grant Restricted Stock
under this Plan at any time or from time to time. Shares of Restricted Stock
may be awarded either alone or in addition to other Awards granted under this
Plan. The Committee shall determine the persons to whom and the time or times
at which grants of Restricted Stock will be awarded, the number of shares of
Restricted Shares to be awarded to any Participant, the time or times within
which such Awards may be subject to forfeiture and any other terms and
conditions of the Awards. Each Award shall be confirmed by, and be subject to
the terms of, an Agreement. The Committee may condition the grant of Restricted
Stock upon the attainment of specified performance goals by the Participant or
by the Company or an Affiliate (including a division or department of the
Company or an Affiliate) for or within which the Participant is primarily
employed or upon such other factors or criteria as the Committee shall
determine. The provisions of Restricted Stock Awards need not be the same with
respect to any Participant.
8.2 Awards and Certificates. Notwithstanding the limitations on issuance
of shares of Common Stock otherwise provided in this Plan, each Participant
receiving an Award of Restricted Stock shall be issued a certificate in respect
of such shares of Restricted Stock. Such certificate shall be registered in the
name of such Participant and shall bear an appropriate legend referring to the
terms, conditions, and restrictions applicable to such Award as determined by
the Committee. The Committee may require that the certificates evidencing such
shares be held in custody by the Company until the restrictions thereon shall
have lapsed and that, as a condition of any Award of Restricted Stock, the
Participant shall have delivered a stock power, endorsed in blank, relating to
the Common Stock covered by such Award.
8.3 Terms and Conditions. Shares of Restricted Stock shall be subject to
the following terms and conditions:
(a) Limitations on Transferability. The purchase price for shares of
Restricted Stock shall be set by the Committee and may be zero. Subject to
the provisions of this Plan and the Agreement, during a period set by the
Committee, commencing with the date of such Award (the "Restriction
Period"), the Participant shall not be permitted to sell, assign, transfer,
pledge or otherwise encumber any interest in shares of Restricted Stock.
Unless otherwise determined by the Committee, awards of Restricted Stock
must be accepted by a Participant within a period of 60 days (or such
shorter periods as the Committee may specify at grant) after the Grant
Date, by executing a Restricted Stock Agreement and paying whatever price,
if any, is required. The Participant shall not have any rights with respect
to such Award, unless and until such Participant has executed an agreement
evidencing the Award and has delivered a fully
15
executed copy thereof to the Company, and has otherwise complied with the
applicable terms and conditions of such Award.
(b) Rights. Except as provided in Section 8.3(a), the Participant
shall have, with respect to the shares of Restricted Stock, all of the
rights of a stockholder of the Company holding the class of Common Stock
that is the subject of the Restricted Stock, including, if applicable, the
right to vote the shares and the right to receive any cash dividends.
Unless otherwise determined by the Committee and subject to this Plan, cash
dividends on the class of Common Stock that is the subject of the
Restricted Stock shall be automatically deferred and reinvested in
additional Restricted Stock, and dividends on the class of Common Stock
that is the subject of the Restricted Stock payable in Common Stock shall
be paid in the form of Restricted Stock of the same class as the Common
Stock on which such dividend was paid.
(c) Criteria. Based on service, performance by the Participant or by
the Company or the Affiliate, including any division or department for
which the Participant is employed or such other factors or criteria as the
Committee may determine, the Committee may provide for the lapse of
restrictions in installments and may accelerate the vesting of all or any
part of any Award and waive the restrictions for all or any part of such
Award.
(d) Forfeiture. Unless otherwise provided in an Agreement or
determined by the Committee, if the Participant incurs a Termination of
Employment during the Restriction Period due to death or Disability, the
restrictions shall lapse and the Participant shall be fully vested in the
Restricted Stock. Except to the extent otherwise provided in the
applicable Agreement and this Plan, upon a Participant's Termination of
Employment for any reason during the Restriction Period other than death or
Disability, all shares of Restricted Stock still subject to restriction
shall be forfeited by the Participant, except the Committee shall have the
discretion to waive in whole or in part any or all remaining restrictions
with respect to any or all of such Participant's shares of Restricted
Stock.
(e) Delivery. If and when the Restriction Period expires without a
prior forfeiture of the Restricted Stock subject to such Restriction
Period, unlegended certificates for such shares shall be delivered to the
Participant.
(f) Election. A Participant may elect to further defer receipt of the
Restricted Stock for a specified period or until a specified event, subject
in each case to the Committee's approval and to such terms as are
determined by the Committee. Subject to any exceptions adopted by the
Committee, such election must be made one (1) year prior to completion of
the Restriction Period.
16
ARTICLE IX
----------
DEFERRED STOCK
--------------
9.1 General. The Committee shall have authority to grant Deferred Stock
under this Plan at any time or from time to time. Shares of Deferred Stock may
be awarded either alone or in addition to other Awards granted under this Plan.
The Committee shall determine the persons to whom and the time or times at which
Deferred Stock will be awarded, the number of shares of Deferred Stock to be
awarded to any Participant, the duration of the period (the "Deferral Period")
prior to which the Common Stock will be delivered, and the conditions under
which receipt of the Common Stock will be deferred and any other terms and
conditions of the Awards. Each Award shall be confirmed by, and be subject to
the terms of, an Agreement. The Committee may condition the grant of Deferred
Stock upon the attainment of specified performance goals by the Participant or
by the Company or an Affiliate, including a division or department of the
Company or an Affiliate for or within which the Participant is primarily
employed or upon such other factors or criteria as the Committee shall
determine. The provisions of Deferred Stock Awards need not be the same with
respect to any Participant.
9.2 Terms and Conditions. Deferred Stock Awards shall be subject to the
following terms and conditions:
(a) Limitations on Transferability. Subject to the provisions of this
Plan and except as may otherwise be provided in an Agreement, neither
Deferred Stock Awards, nor any interest therein, may be sold, assigned,
transferred, pledged or otherwise encumbered during the Deferral Period. At
the expiration of the Deferral Period (or Elective Deferral Period as
defined in Section 9.2(e), where applicable), the Committee may elect to
deliver Common Stock, cash equal to the Fair Market Value of such Common
Stock or a combination of cash and Common Stock, to the Participant for the
shares covered by the Deferred Stock Award.
(b) Rights. Unless otherwise determined by the Committee and subject
to this Plan, cash dividends on the Common Stock that is the subject of the
Deferred Stock Award shall be automatically deferred and reinvested in
additional Deferred Stock, and dividends on the Common Stock that is the
subject of the Deferred Stock Award payable in Common Stock shall be paid
in the form of Deferred Stock of the same class as the Common Stock on
which such dividend was paid.
(c) Criteria. Based on service, performance by the Participant or by
the Company or the Affiliate, including any division or department for
which the Participant is employed or such other factors or criteria as the
Committee may determine, the Committee may provide for the lapse of
deferral limitations in installments and may accelerate the vesting of all
or any part of any Award and waive the deferral limitations for all or any
part of such Award.
17
(d) Forfeiture. Unless otherwise provided in an Agreement or
determined by the Committee, if the Participant incurs a Termination of
Employment during the Deferral Period due to death or Disability, the
restrictions shall lapse and the Participant shall be fully vested in the
Deferred Stock. Unless otherwise provided in an Agreement or determined by
the Committee, upon a Participant's Termination of Employment for any
reason during the Deferral Period other than death or Disability, the
rights to the shares still covered by the Award shall be forfeited by the
Participant, except the Committee shall have the discretion to waive in
whole or in part any or all remaining deferral limitations with respect to
any or all of such Participant's Deferred Stock.
(e) Election. A Participant may elect to further defer receipt of the
Deferred Stock payable under an Award (or an installment of an Award) for a
specified period or until a specified event, subject in each case to the
Committee's approval and to such terms as are determined by the Committee.
Subject to any exceptions adopted by the Committee, such election must be
made at one (1) year prior to completion of the Deferral Period for the
Award.
ARTICLE X
---------
PERFORMANCE SHARES
------------------
10.1 General. Subject to the terms and conditions described below,
Performance Shares may be granted to any Participant at any time and from time
to time as determined by the Committee. The Committee shall have complete
discretion in determining the number of Performance Shares granted to each
Participant; provided, however, that no Participant who is a Covered Employee
may earn more than ________ Performance Shares with respect to any Performance
Period (as defined below).
10.2 Price. The purchase price for Performance Shares shall be zero unless
otherwise specified by the Committee.
10.3 Performance Share Agreement. Subject to the provisions of this Plan,
all the terms and conditions of an Award of Performance Shares shall be
determined by the Committee in its discretion and shall be confirmed by a
Performance Share Award Agreement which shall be executed by the Company and the
Participant. Not later than the date required or permitted for "qualified
performance-based compensation" under Code Section 162(m), the Committee shall
determine the Participants who will potentially receive individual Performance
Share Awards for the Performance Period and the amount or method for determining
the amount of such Participant's number of Performance Shares.
10.4 Performance Periods. Any time period (the "Performance Period")
relating to a Performance Share Award (commencing with the Grant Date) shall be
at least two calendar or Company fiscal years in length unless otherwise
provided by the Committee.
18
10.5 Performance Goals. Not later than the date required or permitted for
"qualified performance-based compensation" under Section 162(m), the Committee
shall establish in writing the performance goals ("Performance Goals") for such
Performance Period, which shall be based on any of the following performance
criteria, either alone or in any combination, and on either a consolidated or
business unit level, as the Committee may determine: sales, net asset turnover,
earnings per share, cash flow, cash flow from operations, operating profit, net
income, operating margin, net income margin, return on net assets, return on
total assets, return on common equity, return on total capital, and total
shareholder return. The foregoing criteria shall have any reasonable
definitions that the Committee may specify, which may include or exclude any or
all of the following items as the Committee may specify; extraordinary, unusual
or nonrecurring items; effects of accounting changes; effects of financing
activities (e.g., effect on earnings per share of issuance of convertible debt
securities); expenses for restructuring or productivity initiates; other
nonoperating items; spending for acquisitions; effects of divestitures; and
effects of litigation activities and settlements. Any such performance
criterion or combination of such criteria may apply to the Participant's Award
opportunity in its entirety or to any designated portion or portions of the
Award opportunity, as the Committee may specify. Unless the Committee
determines otherwise for any Performance Period, extraordinary items, such as
capital gains and losses, which affect any performance criterion applicable to
the Award (including but not limited to the criterion of net income) shall be
excluded or included in determining the extent to which the correspondence
performance goal has been achieved, whichever will produce the higher Award.
The Committee may, in its discretion, vary the terms and conditions of any
Performance Share Award, including, without limitation, the Performance Period
and Performance Goals, without shareholder approval, as applied to any recipient
who is not a Covered Employee with respect to the Company. In the event
applicable tax or securities laws change to permit the Committee discretion to
alter the governing performance measures without obtaining shareholder approval
of such changes, the Committee shall have sole discretion to make such changes
without obtaining shareholder approval.
10.6 Earning of Performance Shares. After the applicable Performance
Period shall have ended, the Committee shall certify the extent to which the
established Performance Goals have been achieved. The retention of Performance
Shares shall be a direct function of the extent to which the Company's
Performance Goals have been achieved. A Participant may earn more or less than
the number of Performance Shares originally awarded, or no Performance Shares at
all. Performance Shares shall be paid in the form of Company Stock.
Unrestricted certificates representing such number of shares of Common Stock as
equals the number of Performance Shares earned under the Award shall be
delivered to the Participant as soon as practicable after the end of the
applicable Performance Period. Participants shall also be entitled to any
dividends or other distributions that would have been paid or earned in respect
of such shares of Common Stock had such shares been outstanding during the
period from the initial award date to the final payout on the Performance
Shares, and may be paid in the form of Common Stock. Unless otherwise provided,
in its discretion, by the Committee, any such dividends or other distributions
shall not bear interest. All determinations by the Committee as to the
establishment of Performance Goals and the potential Awards related to such
Performance Goals
19
and as to the achievement of Performance Goals relating to such Awards, and the
number of any Performance Shares shall be made in writing in the case of any
Award intended to qualify under Code Section 162(m). The Committee may not
delegate any responsibility relating to such Awards.
10.7 Termination of Employment Due to Death, Disability or Retirement or at
the Request of the Company Without Cause. In the event of an Extraordinary
Termination of Employment or a termination of Employment by the Company without
Cause during a Performance Period, the Participant shall receive a prorated
payout with respect to the Performance Shares relating to such Performance
Period. The prorated payout shall be determined by the Committee, in its sole
discretion, and shall be based upon the length of time that the Participant held
the Performance Shares during the Performance Period and based upon the
achievement of the established Performance Goals. Distribution of earned
Performance Shares shall be made at the same time payments are made to
Participants who did not incur a Termination of Employment during the applicable
Performance Period.
10.8 Termination of Employment for Other Reasons. In the event that a
Participant's employment terminates for any reason other than those reasons set
forth in Section 10.7, all Performance Shares shall be forfeited by the
Participant to the Company.
10.9 Nontransferability. Unless otherwise provided in an Agreement
Performance Shares may not be sold, transferred, pledged, assigned or otherwise
alienated or hypothecated, other than by will or by the laws of descent and
distribution. Further, a Participant's rights under the Plan shall be
exercisable during the Participant's lifetime only by the Participant or a
Representative.
ARTICLE XI
----------
ANNUAL INCENTIVE AWARDS
-----------------------
11.1 Eligibility. Participants designated by the Committee shall be
eligible for an Annual Incentive Award, the amount of which will be based on the
satisfaction of specified bonus targets ("Award Targets"). Not later than the
date required as permitted for "qualified performance-based compensation" under
Code, Section 162(m), the Committee shall establish in writing (i) the Award
Targets and (ii) the Annual Incentive Awards which may be earned by
Participants, based upon the extent to which the Award Targets are achieved
("Award Opportunities"). The Award Targets and Award Opportunities shall be
confirmed in Agreements between the Company and the Participants. The Award
Targets shall be based on any of the following performance criteria, either
alone or in any combination, and on either a consolidated or business unit
level, as the Committee may determine: sales, net asset turnover, earnings per
share, cash flow, cash flow from operations, operating profit, net income,
operating margin, net income margin, return on net assets, return on total
assets, return on common equity, return on total capital, and total shareholder
return. The foregoing criteria shall have any reasonable definitions that the
Committee may specify, which may include or exclude any or all of the
20
following items; effects of accounting changes; effects of financing activities
(e.g., effect on earnings per share of issuance of convertible debt securities);
expenses for restructuring or productivity initiates; other nonoperating items;
spending for acquisitions; effects of divestitures; and effects of litigation
activities and settlements. Any such performance criterion or combination of
such criteria may apply to the Participant's Award opportunity in its entirety
or to any designated portion or portions of the Award opportunity, as the
Committee may specify. Unless the Committee determines otherwise for any
Performance Period, extraordinary items, such as capital gains and losses, which
affect any performance criterion applicable to the Award (including but not
limited to the criterion of net income) shall be excluded or included in
determining the extent to which the corresponding performance goal has been
achieved, whichever will produce the higher Award. The Committee may specify the
amount of the individual Award as a percentage of such business criteria, a
percentage thereof in excess of a threshold amount, or another amount which need
not bear a strictly mathematical relationship to such relationship criteria.
With respect to any Performance Period, the Committee may establish an aggregate
limit or individual with respect to the value of the Awards.
11.2 Earning of Annual Incentive Awards. After the applicable fiscal year
shall have ended, the Committee shall certify in writing, the extent to which
the established Award Targets have been achieved. The Committee may, in its
discretion, determine that the amount payable to any Participant as a final
Annual Incentive Award shall be increased or reduced from the amount of his or
her potential Bonus Award, including a determination to make no final Award
whatsoever, but the Committee may not exercise discretion to increase any such
amount in the case of an individual Award with respect to a Covered Employee
intended to qualify under Code Section 162(m). Unless otherwise determined by
the Company or its Affiliates during the Performance Period. Unless otherwise
determined by the Committee, during a Performance Period, an Award shall be
payable under this Plan to the Participant who incurs an Extraordinary
Termination of Employment or a termination of Employment by the Company without
cause, which shall be adjusted, pro rata, for the period of time during the
year the Participant actually worked. Unless otherwise provided by the
Committee, a Participant who incurs a Termination of Employment other than an
Extraordinary Termination of Employment or a termination of Employment by the
Company without cause prior to the end of the Performance Period shall not be
entitled to any Award under the Performance Period. Subsequently, the Committee
shall calculate the Annual Incentive Award (if any) for each Participant, based
upon the Award Opportunities established by the Committee prior to the beginning
of the applicable year. Each Annual Incentive Award shall be solely a function
of the degree to which the established Award Targets have been achieved.
11.3 Payments and Election. Participants may elect to receive Annual
Incentive payouts in cash, Common Stock, Deferred Stock, Restricted Stock or a
combination of the foregoing, provided that any election for payment in Common
Stock is subject to the approval of the Committee. Payouts with respect to a
fiscal year will be made within seventy-five (75) days of the end of such year.
To elect the payout of a portion of an Annual Incentive Award in Common Stock, a
Participant must inform the Committee in writing prior to the start of the
fiscal year with respect to which payout would be
21
made. Unless modified by the Committee before the beginning of a fiscal year of
the Company, terms and conditions of Deferred or Restricted Stock payouts shall
include the following:
(a) Any portion of an Annual Incentive Award can be elected for
payout in Restricted Stock, either in a dollar amount or as a percentage of
the total Annual Incentive Award.
(b) Deferred or Restricted Stock will be issued on the same date that
cash payouts would be made, based on the closing price of the Common Stock
as of the date of the award ("Closing Price") on the principal exchange on
which the Common Stock shall then be listed or quoted.
(c) Deferred or Restricted Stock will be issued pursuant to, and
shall be subject to the terms and conditions contained in this Plan. Unless
otherwise agreed, the Deferral Period or Restriction Period, respectively,
will be for a period determined by the Committee of at least three (3)
years in duration, after which time the Common Stock will be distributed or
released to the Participant.
(d) The number of shares of Deferred Stock or Restricted Stock
granted to a Participant will equal the product of (A) such number of
shares of Common Stock as have an aggregate closing price equal to the
dollar amount of the Annual Incentive Award elected to be received in the
form of Deferred Stock or Restricted Stock, multiplied by (B) a factor
greater than 1.00 but less than or equal to 1.30, as determined by the
Committee prior to the beginning of the Company's applicable fiscal year.
(e) If the Participant incurs a termination of employment by reason
of death, Disability or Retirement or by the Company without Cause, the
Committee, at its discretion, may provide for waiver of all, or a portion
of the deferrals or restrictions applicable to, unvested restricted Awards.
If the Participant's incurs a termination of employment for any other
reason, the shares of Common Stock may be forfeited.
11.4 Amendment of Awards. The Committee has discretion, subject to the
Plans ___________ a plan of performance-based compensation under Code Section
162 (iv), to vary the terms and conditions of any Annual Incentive Award,
including, without limitation, the Award Targets, without shareholder approval,
as applied to any participant who is not a "covered employee" with respect to
the Company as defined in Section 162(m) of the Code.
11.5 Performance Threshold. The Committee may establish minimum levels of
Company performance which must be achieved during a fiscal year before any
Annual Incentive Awards shall be paid to Participants.
11.6 Maximum Awards. The Committee may establish guidelines governing the
maximum Annual Incentive Awards that may be earned by Participants (either in
the aggregate, by employee class or among individual Participants), provided
that no participant may receive an Annual Incentive Awards in an amount
(including the value of any Common Stock constituting
22
any portion of such Annual Incentive Awards) of greater than $1,500,000 with
respect to any fiscal year of the Company.
11.7 Termination of Employment. In the event a participant's employment
is terminated for any reason, such participant shall not be entitled to receive
any Annual Incentive Award with respect to the fiscal year in which the
termination occurs.
ARTICLE XII
-----------
PROVISIONS APPLICABLE TO STOCK ACQUIRED UNDER THIS PLAN
-------------------------------------------------------
12.1 Limited Transfer During Offering. In the event there is an effective
registration statement under the Securities Act pursuant to which shares of
Common Stock shall be offered for sale in an underwritten offering, a
Participant shall not, during the period requested by the underwriters managing
the registered public offering, effect any public sale or distribution of shares
received directly or indirectly pursuant to an exercise of an Award.
12.2 No Company Obligation. None of the Company, an Affiliate or the
Committee shall have any duty or obligation to affirmatively disclose to a
record or beneficial holder of Common Stock or an Award, and such holder shall
have no right to be advised of any material information regarding the Company or
any Affiliate at any time prior to, upon or in connection with receipt or the
exercise of an Award or the Company's purchase of Common Stock or an Award from
such holder in accordance with the terms hereof.
ARTICLE XIII
------------
CHANGE IN CONTROL PROVISIONS
----------------------------
13.1 Impact of Event. Notwithstanding any other provision of this Plan to
the contrary, in the event of a Change in Control (as defined in Section 13.2),
the Committee shall have full discretion, notwithstanding anything herein or in
an Agreement to the contrary, to do any or all of the following with respect to
an outstanding Award:
(a) to provide that the Stock Options and Stock Appreciation Rights
outstanding as of the date of the Change in Control which are not then
exercisable shall become fully exercisable to the full extent of the
original grant;
(b) to provide that the restrictions and deferral limitations
applicable to any Restricted Stock, Deferred Stock or other Award shall
lapse, and such Restricted Stock, Deferred Stock or other Award shall
become free of all restrictions and become fully vested and transferrable
to the full extent of the original grant;
23
(c) to deem any performance goal or other condition with respect to
any Performance Shares or Annual Incentive Award to have been satisfied in
full, and such Award shall be fully distributable;
(d) to cause any Award to be cancelled, provided notice of at least
15 days thereof is provided before the date of cancellation;
(e) to provide that the securities of another entity be substituted
hereunder for the Common Stock and to make equitable adjustment with
respect thereto;
(f) to grant the Participant the right to elect by giving notice
during a set period of time from and after a Change in Control to surrender
all or part of a stock-based Award to the Company and to receive cash in an
amount equal to the amount by the "Change in Control Price" (as defined in
Section 13.3) per share of the Common Stock on the date of the election
exceeds the amount the Participant must pay to exercise the Award per share
of Common Stock under the Award (the "Spread") multiplied by the number of
shares of Common Stock granted under the Award; and
(g) to take any other action the Committee determines to take.
13.2 Definition of Change in Control. For purposes of this Plan, a "Change
in Control" shall mean the happening of any of the following events:
(a) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act (a "Person") of
beneficial ownership (within the meaning of Rule 13d-3 promulgated under
the Exchange Act) of twenty percent (20%) or more of either (i) the then-
outstanding shares of common stock of the Company (the "Outstanding Company
Common Stock") or (ii) the combined voting power of the then-outstanding
voting securities of the Company entitled to vote generally in the election
of directors (the "Outstanding Company Voting Securities"); provided,
however, that for purposes of this subsection (a), the following
acquisitions shall not constitute a Change of Control: (i) any acquisition
directly from the Company, (ii) any acquisition by the Company, (iii) any
acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by the Company,
(iv) any acquisition by a lender to the Company pursuant to a debt
restructuring of the Company, or (v) any acquisition by any corporation
pursuant to a transaction which complies with clauses (i), (ii) and (iii)
of subsection (c) of this Section 13.2;
(b) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority
of the Board; provided, however, that any individual becoming a director
subsequent to the date hereof whose election, or nomination for election by
the Company's shareholders, was approved by a vote of at least a majority
of the directors then comprising the Incumbent Board shall be considered as
though such individual were a member of the Incumbent Board, but
24
excluding, for this purpose, any such individual whose initial assumption
of office occurs as a result of an actual or threatened election contest
with respect to the election or removal of directors or other actual or
threatened solicitation of proxies or consents by or on behalf of a Person
other than the Board.
(c) Consummation of a reorganization, merger or consolidation or sale
or other disposition of all or substantially all of the assets of the
Company (a "Business Combination"), in each case, unless, following such
Business Combination, (i) all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the Outstanding
Company Common Stock and Outstanding Company Voting Securities immediately
prior to such Business Combination beneficially own, directly or
indirectly, more than ______ percent (__%) of, respectively, the then-
outstanding shares of common stock and the combined voting power of the
then outstanding voting securities entitled to vote generally in the
election of directors, as the case may be, of the corporation resulting
from such Business Combination (including, without limitation, a
corporation which as a result of such transaction owns the Company or all
or substantially all of the Company's assets either directly or through one
or more subsidiaries) in substantially the same proportions as their
ownership, immediately prior to such Business Combination of the
Outstanding Company Common Stock and Outstanding Company Voting Securities,
as the case may be, (ii) no Person (excluding any corporation resulting
from such Business Combination or any employee benefit plan (or related
trust) of the Company or such corporation resulting from such Business
Combination) beneficially owns, directly or indirectly, twenty percent
(20%) or more of, respectively, the then outstanding shares of common stock
of the corporation resulting from such Business Combination, or the
combined voting power of the then outstanding voting securities of such
corporation except to the extent that such ownership existed prior to the
Business Combination and (iii) at least a majority of the members of the
board of directors of the corporation resulting from such Business
Combination were members of the Incumbent Board at the time of the
execution of the initial agreement, or of the action of the Board,
providing for such Business Combination; or
(d) Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
13.3 Change in Control Price. For purposes of this Plan, "Change in
Control Price" means the higher of (a) the highest reported sales price of a
share of Common Stock in any transaction reported on the principal exchange on
which such shares are listed or on Nasdaq during the 60-day period prior to and
including the date of a Change in Control or (b) if the Change in Control is the
result of a tender or exchange offer or a Corporate Transaction, the highest
price per share of Common Stock paid in such tender or exchange offer or a
Corporate Transaction, except that, in the case of Incentive Stock Options and
Stock Appreciation Rights relating to Incentive Stock Options, such price shall
be based only on the Fair Market Value of the Common Stock on the date such
Incentive Stock Option or Stock Appreciation Right is exercised. To the extent
that the consideration paid in any such transaction described above
25
consists all or in part of securities or other non-cash consideration, the value
of such securities or other non-cash consideration shall be determined in the
sole discretion of the Committee.
13.4 Definition of Potential Change in Control. For purposes of Section
____, a "Potential Change in Control" means the happening of any one of the
following:
(i) The entering into an agreement by the Company, the consummation
of which would result in a Change in Control of the Company as defined in
Section 13.2; or
(ii) The acquisition of beneficial ownership, directly or indirectly,
by any entity, person or group (other than the Company or any Company
employee benefit plan, including any trustee of such plan acting as such
trustee) of securities of the Company representing 5% or more of the
combined voting power of the Company's outstanding securities, and the
adoption by the Board of a resolution to the effect that a "Potential
Change in Control" of the Company has occurred for the purposes of this
Plan.
ARTICLE XIV
-----------
MISCELLANEOUS
-------------
14.1 Amendments and Termination. The Board may amend, alter or discontinue
the Plan at any time, but no amendment, alteration or discontinuation shall be
made which would impair the rights of a Participant under an Award theretofore
granted without the Participant's consent, except such an amendment (a) made to
avoid an expense charge to the Company or an Affiliate, (b) made to cause the
Plan to qualify for the exemption provided by Rule 16b-3, or (d) made to permit
the Company or an Affiliate a deduction under the Code. In addition, no such
amendment shall be made without the approval of the Company's stockholders to
the extent such approval is required by law or agreement. The Committee may
amend, alter or discontinue the terms of any Award theretofore granted,
prospectively or retroactively, on the same conditions and limitations (and
exceptions to limitations) as the Board and further subject to any approval or
limitations the Board may impose.
Notwithstanding anything in the Plan to the contrary, if any right under
this Plan would cause a transaction to be ineligible for pooling of interest
accounting that would, but for the right hereunder, be eligible for such
accounting treatment, the Committee may modify or adjust the right so that
pooling of interest accounting shall be available, including the substitution of
Common Stock having a Fair Market Value equal to the cash otherwise payable
hereunder for the right which caused the transaction to be ineligible for
pooling of interest accounting.
14.2 Unfunded Status of Plan. It is intended that this Plan be an
"unfunded" plan for incentive and deferred compensation. The Committee may
authorize the creation of trusts or other arrangements to meet the obligations
created under this Plan to deliver Common Stock or make payments; provided,
however, that, unless the Committee otherwise determines, the existence of such
trusts or other arrangements is consistent with the "unfunded" status of this
Plan.
26
14.3 Status of Awards Under Code Section 162(m). It is the intent of the
Company that Awards granted to persons who are Covered Employees within the
meaning of Code Section 162(m) shall constitute "qualified performance-based
compensation" satisfying the requirements of Code Section 162(m). Accordingly,
the provisions of the Plan shall be interpreted in a manner consistent with Code
Section 162(m). If any provision of the Plan or any agreement relating to such
an Award does not comply or is inconsistent with the requirements of Code
Section 162(m), such provision shall be construed or deemed amended to the
extent necessary to conform to such requirements.
14.4 General Provisions.
(a) Representation. The Committee may require each person purchasing
or receiving shares pursuant to an Award to represent to and agree with the
Company in writing that such person is acquiring the shares without a view
to the distribution thereof. The certificates for such shares may include
any legend which the Committee deems appropriate to reflect any
restrictions on transfer.
(b) No Additional Obligation. Nothing contained in this Plan shall
prevent the Company or an Affiliate from adopting other or additional
compensation arrangements for its employees.
(c) Withholding. No later than the date as of which an amount first
becomes includible in the gross income of the Participant for Federal
income tax purposes with respect to any Award, the Participant shall pay to
the Company (or other entity identified by the Committee), or make
arrangements satisfactory to the Company or other entity identified by the
Committee regarding the payment of, any Federal, state, local or foreign
taxes of any kind required by law to be withheld with respect to such
amount required in order for the Company or an Affiliate to obtain a
current deduction. Unless otherwise determined by the Committee,
withholding obligations may be settled with Common Stock, including Common
Stock that is part of the Award that gives rise to the withholding
requirement provided that any applicable requirements under Section 16 of
the Exchange Act are satisfied. The obligations of the Company under this
Plan shall be conditional on such payment or arrangements, and the Company
and its Affiliates shall, to the extent permitted by law, have the right to
deduct any such taxes from any payment otherwise due to the Participant.
If the Participant disposes of shares of Common Stock acquired pursuant to
an Incentive Stock Option in any transaction considered to be a
disqualifying transaction under the Code, the Participant must give written
notice of such transfer and the Company shall have the right to deduct any
taxes required by law to be withheld from any amounts otherwise payable to
the Participant.
(d) Reinvestment. The reinvestment of dividends in additional
Deferred or Restricted Stock at the time of any dividend payment shall only
be permissible if sufficient shares of Common Stock are available for such
reinvestment (taking into account then outstanding Options and other
Awards).
27
(e) Representation. The Committee shall establish such procedures as
it deems appropriate for a Participant to designate a Representative to
whom any amounts payable in the event of the Participant's death are to be
paid.
(f) Controlling Law. This Plan and all Awards made and actions taken
thereunder shall be governed by and construed in accordance with the laws
of the State of Delaware (other than its law respecting choice of law).
This Plan shall be construed to comply with all applicable law, and to
avoid liability to the Company, an Affiliate or a Participant, including,
without limitation, liability under Section 16(b) of the Exchange Act.
(g) Offset. Any amounts owed to the Company or an Affiliate by the
Participant of whatever nature may be offset by the Company from the value
of any shares of Common Stock, cash or other thing of value under this
Plan or an Agreement to be transferred to the Participant, and no shares of
Common Stock, cash or other thing of value under this Plan or an Agreement
shall be transferred unless and until all disputes between the Company and
the Participant have been fully and finally resolved and the Participant
has waived all claims to such against the Company or an Affiliate.
(h) Fail-Safe. With respect to persons subject to Section 16 of the
Exchange Act, transactions under this Plan are intended to comply with all
applicable conditions of Rule 16b-3 or Rule 16a-1(c)(3), as applicable. To
the extent any provision of the Plan or action by the Committee fails to so
comply, it shall be deemed null and void, to the extent permitted by law
and deemed advisable by the Committee. Moreover, in the event the Plan
does not include a provision required by Rule 16b-3 or Rule 16a-1(c)(3) to
be stated herein, such provision (other than one relating to eligibility
requirements or the price and amount of Awards) shall be deemed to be
incorporated by reference into the Plan with respect to Participants
subject to Section 16.
(i) Right to Capitalize. The grant of an Award shall in no way affect
the right of the Company to adjust, reclassify, reorganize or otherwise
change its capital or business structure or to merge, consolidation,
dissolve, liquidate or sell or transfer all or any part of its business or
assets.
14.5 Mitigation of Excise Tax. Subject to any other agreement between the
Participant and the Company or an Affiliate, if any payment or right accruing to
a Participant under this Plan (without the application of this Section 14.5),
either alone or together with other payments or rights accruing to the
Participant from the Company or an Affiliate ("Total Payments") would constitute
a "parachute payment" (as defined in Section 280G of the Code and regulations
thereunder), such payment or right shall be reduced to the largest amount or
greatest right that will result in no portion of the amount payable or right
accruing under this Plan being subject to an excise tax under Section 4999 of
the Code or being disallowed as a deduction under Section 280G of the Code. The
determination of whether any reduction in the rights or payments under this Plan
is to apply shall be made by the Committee in good faith after consultation with
the
28
Participant, and such determination shall be conclusive and binding on the
Participant. The Participant shall cooperate in good faith with the Committee in
making such determination and providing the necessary information for this
purpose. The foregoing provisions of this Section 14.5 shall apply with respect
to any person only if after reduction for any applicable federal excise tax
imposed by Section 4999 of the Code and federal income tax imposed by the Code,
the Total Payments accruing to such person would be less than the amount of the
Total Payments as reduced, if applicable, under the foregoing provisions of this
Plan and after reduction for only federal income taxes.
14.6 Rights with Respect to Continuance of Employment. Nothing contained
herein shall be deemed to alter the relationship between the Company or an
Affiliate and a Participant, or the contractual relationship between a
Participant and the Company or an Affiliate if there is a written contract
regarding such relationship. Nothing contained herein shall be construed to
constitute a contract of employment between the Company or an Affiliate and a
Participant. The Company or an Affiliate and each of the Participants continue
to have the right to terminate the employment or service relationship at any
time for any reason, except as provided in a written contract. The Company or
an Affiliate shall have no obligation to retain the Participant in its employ or
service as a result of this Plan. There shall be no inference as to the length
of employment or service hereby, and the Company or an Affiliate reserves the
same rights to terminate the Participant's employment or service as existed
prior to the individual becoming a Participant in this Plan.
14.7 Awards in Substitution for Awards Granted by Other Corporations.
Awards may be granted under this Plan from time to time in substitution for
awards in respect of other plans of other entities. The terms and conditions of
the Awards so granted may vary from the terms and conditions set forth in this
Plan at the time of such grant as the majority of the members of the Committee
may deem appropriate to conform, in whole or in part, to the provisions of the
awards in substitution for which they are granted.
14.8 Procedure for Adoption. Any Affiliate of the Company may by
resolution of such Affiliate's board of directors, with the consent of the Board
of Directors and subject to such conditions as may be imposed by the Board of
Directors, adopt this Plan for the benefit of its employees as of the date
specified in the board resolution.
14.9 Procedure for Withdrawal. Any Affiliate which has adopted this Plan
may, by resolution of the board of directors of such direct or indirect
subsidiary, with the consent of the Board of Directors and subject to such
conditions as may be imposed by the Board of Directors, terminate its adoption
of this Plan.
29
14.10 Delay. If at the time a Participant incurs a Termination of
Employment (other than due to Cause) or if at the time of a Change in Control,
the Participant is subject to "short-swing" liability under Section 16 of the
Exchange Act, any time period provided for under this Plan or an Agreement to
the extent necessary to avoid the imposition of liability shall be suspended and
delayed during the period the Participant would be subject to such liability,
but not more than six (6) months and one (1) day and not to exceed the Option
Period, or the period for exercise of a Stock Appreciation Right as provided in
the Agreement, whichever is shorter. The Company shall have the right to suspend
or delay any time period described in this Plan or an Agreement if the Committee
shall determine that the action may constitute a violation of any law or result
in liability under any law to the Company, an Affiliate or a stockholder of the
Company until such time as the action required or permitted shall not constitute
a violation of law or result in liability to the Company, an Affiliate or a
stockholder of the Company. The Committee shall have the discretion to suspend
the application of the provisions of this Plan required solely to comply with
Rule 16b-3 if the Committee shall determine that Rule 16b-3 does not apply to
this Plan.
14.11 Headings. The headings contained in this Plan are for reference
purposes only and shall not affect the meaning or interpretation of this Plan.
14.12 Severability. If any provision of this Plan shall for any reason be
held to be invalid or unenforceable, such invalidity or unenforceability shall
not effect any other provision hereby, and this Plan shall be construed as if
such invalid or unenforceable provision were omitted.
14.13 Successors and Assigns. This Plan shall inure to the benefit of and
be binding upon each successor and assign of the Company. All obligations
imposed upon a Participant, and all rights granted to the Company hereunder,
shall be binding upon the Participant's heirs, legal representatives and
successors.
14.14 Entire Agreement. This Plan and the Agreement constitute the entire
agreement with respect to the subject matter hereof and thereof, provided that
in the event of any inconsistency between this Plan and the Agreement, the terms
and conditions of the Agreement shall control.
Executed on this ____ day of ________, 199__.
CUNO INCORPORATED
By_________________________
30